Report: EPL Clubs to Adjust Amid Shareholder Loan Changes | OneFootball

Premier League and Shareholder Loans: A Scramble for Balance

The recent tribunal ruling involving Manchester City and the Premier League has thrown the issue of shareholder loans into the spotlight, sparking concerns over competition and financial sustainability. The ruling determined that shareholder loans should be treated like any other financial transaction and brought under the scrutiny of the Associated Party Transactions (APT) rules, something that could have far-reaching consequences for Premier League clubs.

Shareholder loans have become a vital part of modern football finance. According to The Athletic’s Philip Buckingham and Matt Slater, “it is money loaned to a club by their shareholders. They amount to a form of funding, a means for owners to inject cash into the football project without seeking equity in return. Typically these are long-term arrangements, often free of interest payments.”

For Premier League clubs, this means of financing has been especially popular. As of the 2022-23 season, £1.5 billion out of £4 billion in total borrowings across the division was accounted for by shareholder loans. “Three clubs lead the way by some distance: Everton, Brighton & Hove Albion and Arsenal. Collectively, those three had £1.08 billion of debt owed in shareholder loans recorded in their 2022-23 accounts.” These loans are crucial for keeping clubs competitive, particularly in a league where financial pressures are always mounting.

The Implications of the Tribunal Ruling

Manchester City argued in their case that the current system was “discriminatory and distortive.” Shareholder loans, by nature, don’t fit within the framework of fair market value (FMV), and City suggested that allowing them while scrutinising sponsorship deals amounted to an unfair advantage. The independent panel sided with City, acknowledging that shareholder loans should not be exempt from APT regulations.

Until now, the Premier League had excluded shareholder loans from APT rules, claiming they would “encourage investment” in clubs. Now, under the tribunal’s ruling, any shareholder loan will need to reflect FMV and carry interest rates comparable to commercial loans. This change brings the Premier League in line with UEFA’s Financial Fair Play (FFP) regulations, which have already imposed FMV on shareholder loans.

Clubs Affected by the Rule Change

Everton, Brighton, and Arsenal top the list of clubs with the most to lose from this ruling. Everton’s loans from owner Farhad Moshiri, which total £451 million, have propped up the club’s financial structure, while Brighton owe £373 million to Tony Bloom in similar interest-free loans. Arsenal’s £259 million from Kroenke Sports & Entertainment adds further complexity, particularly as they already pay low interest on their debt.

Photo: IMAGO

There’s also the question of whether other clubs will convert existing loans into shares to avoid falling foul of these new rules. As The Athletic reports, Leicester City’s parent company, King Power, has already taken this route, converting £194 million of shareholder loans into equity in 2023.

A Problem the Premier League Must Solve

The Premier League now faces a significant challenge in adjusting its financial rules. The tribunal’s ruling opens a “can of worms” that may leave the league vulnerable to further legal action. As competition law expert Jack Williams points out, “the Premier League’s current rules have just been found to break competition law, so they must be careful not to create a new problem.”

The question remains whether the changes will apply retrospectively, which could drag several clubs into serious financial reassessment. If loans from previous seasons must now be scrutinised, clubs like Everton and Brighton could face hefty interest charges that impact their Profit and Sustainability Reports (PSR).

Our View – EPL Index Analysis

The Premier League finds itself on the precipice of a significant overhaul in financial regulation. For football fans, this ruling is a reminder of how deeply entwined modern football has become with financial engineering. Shareholder loans have been a lifeline for many clubs, especially those trying to break into the elite. However, this ruling makes it clear that they are no longer a backdoor to bypass financial fairness rules.

Everton fans, in particular, might be concerned about the future stability of their club. With £451 million in loans, it’s not just about financial penalties—it’s about the survival of a club struggling both on and off the pitch. Brighton, too, though performing well on the field, might feel the pinch as they look to secure their future in upper echelon of football under Tony Bloom’s ownership.

For Arsenal, the effects may be more manageable given their strong revenue streams and participation in top-level European competition. However, this ruling could still change how they approach future financing under the ownership of Kroenke Sports & Entertainment.

In the end, fans are left wondering whether financial regulations like these will truly level the playing field or simply add more barriers for clubs looking to break into the Premier League’s upper echelons.